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12/11/2013 @ 12:23PM24,480 views

New Jersey Suspends Review Of PokerStars' Online Gambling License

Screenshot of the Pokerstars GUI (the “classic” theme) at a real money table (Photo credit: Wikipedia)

The New Jersey Division of Gaming Enforcement has suspended the review of PokerStars’ application for an online gambling license for two years, locking the world’s biggest online poker company out of the largest state to regulate online gambling. The decision is a big setback for PokerStars’ effort to return to the U.S. market, but New Jersey regulators are leaving the door open to reconsidering PokerStars’ application under certain circumstances.

“The Division of Gaming Enforcement has determined that the application of Rational Services Limited (PokerStars) casino service industry licensure (CSIE) will be held in a suspended status for a period of two years,” the New Jersey Division of Gaming Enforcement said in a statement. “The Division, within that period, may consider a request for relief to reactivate the application if significantly changed circumstances are demonstrated at which time the Division’s investigation of PokerStars and its affiliated entities and associated individuals will be resumed to assess suitability.”

The stated reason for the New Jersey Division of Gaming Enforcement’s decision is PokerStars’ continued association with its founder, Isai Scheinberg, who remains under federal indictment. Federal prosecutors in Manhattan indicted Scheinberg in 2011 for violating the Unlawful Internet Gambling Enforcement Act and the Illegal Gambling Business Act, but Scheinberg, who is not a U.S. citizen, has not come to the U.S. to face the charges. He recently hired former U.S. Attorney General Michael Mukasey as his lawyer.

“The Division’s determination is based primarily on the unresolved federal indictment against Isai Scheinberg for the alleged violation of federal gambling statutes, namely, the Illegal Gambling Business Act and the Unlawful Internet Gambling Enforcement Act (UIGEA), and the involvement of certain PokerStars executives with Internet gaming operations in the United States following the enactment of UIGEA,” the New Jersey DGE said in its statement.

New Jersey is the most important state to have launched online gambling since the Department of Justice in late 2011 reversed its position that all forms of online gambling were prohibited by the Wire Act, freeing up states that wanted to set up regulatory regimes for all forms of Internet gambling other than sports betting.

For years, PokerStars, based in the Isle of Man, operated the most popular U.S. facing online poker web site, but federal prosecutors shut down its U.S. operations in 2011, partly by accusing the company of violating UIGEA, a law Congress passed in 2006 that remains in effect. PokerStars settled the civil charges the government filed against it by paying $731 million and as part of the deal Scheinberg resigned from a direct management role at PokerStars. Scheinberg continues to work for the company as an advisor and is officially called a PokerStars fellow.

“We are disappointed that the N.J. Division of Gaming Enforcement has suspended the review of our application at this time,” Eric Hollreiser, a PokerStars spokesman, said in a statement. “We note that the DGE will resume the review of our application if our circumstances change. We will remain in open dialogue with the DGE and will update them on changes in our situation as they occur.”

PokerStars has worked hard to come back to the U.S., but for now will be shut out from New Jersey as other big U.S. casino companies like Caesars EntertainmentCaesars Entertainment and MGM ResortsMGM Resorts build their online businesses and brands in the state without having to compete directly against the world’s most powerful and popular online poker brand. Caesars recently spun off a company that has ownership in its online gambling assets, Caesars Acquisition Corp., which trades on Nasdaq. Caesars, MGM and the other groups pursuing online gambling in the U.S. still need to counter billionaire Sheldon Adelson, the chief executive of Las Vegas SandsLas Vegas Sands who has vowed to “spend whatever it takes” to stop online gambling in America.

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